Scotland is poised to make financial history, with First Minister John Swinney confirming that the Scottish government is on track to issue its first ever government bonds—cheekily nicknamed “kilts”—in the 2026-27 financial year. This move, which would allow Scotland to borrow directly from investors to fund major infrastructure projects, marks a new chapter in the country’s economic development and its ongoing quest for greater financial autonomy within the United Kingdom.
The announcement, made on November 13, 2025, comes as Scotland received its first credit ratings from two of the world’s leading agencies. Moody’s assigned an Aa3 rating, while S&P Global gave Scotland an AA rating. Both ratings are identical to those held by the UK as a whole, and are seen as a strong endorsement of Scotland’s prudent fiscal management and economic stability. According to Moody’s, Scotland’s rating is “supported by the well-established devolution framework” and the government’s “prudent fiscal management.” S&P Global echoed this sentiment, describing Scotland’s economy as “strong” and operating “within a stable and predictable institutional framework.”
The bond issuance is not a done deal just yet—it’s subject to the outcome of the May 2026 Holyrood election and other market factors. If the pro-independence Scottish National Party (SNP) is re-elected, the government plans to roll out a £1.5 billion ($2 billion) bond program over the life of the next parliament. Swinney explained that the proceeds would be channeled into capital investment for key infrastructure, including housing, roads, hospitals, and schools. “This is about using the powers we have to borrow better—not more—and reflects the maturity of Scotland’s public finances after more than 25 years of devolution,” Swinney told reporters, according to BBC. “It is the latest step in building the institutions and tools Scotland needs for a prosperous future where our country takes responsibility for its own decisions.”
For those less familiar with the financial jargon, a government bond is essentially a loan that investors make to the government. In return, investors receive regular interest payments, and the government promises to pay back the principal at the end of the agreed term. In the UK, these are known as gilts, but in a nod to Scottish culture, the new bonds have been dubbed “kilts.” The Scottish government has technically had the power to issue bonds since 2015, a right granted after the 2014 independence referendum. However, up until now, the government has relied on borrowing from the UK National Loans Fund, which is managed by Westminster.
So why issue bonds now? According to analysis by the Scottish government, bonds could offer better value and greater flexibility under certain circumstances. They also represent a significant step toward demonstrating financial sovereignty and attracting a new pool of investors. As Bloomberg reported, the move is seen as a way for Scotland to “demonstrate greater financial sovereignty” and gain access to new sources of capital. The government is expected to shortly begin engaging with banks to act as joint lead managers, ensuring the next administration can proceed without delay.
Of course, the timing and scale of the bond program are not without their challenges. The Scottish government is currently allowed to borrow up to £472 million for capital investment in the next year under a 2023 agreement with the UK government. This would bring total capital borrowing close to £2.7 billion, just shy of the legal limit of £3.1 billion. And while the £1.5 billion planned over the next parliament is a significant sum for Scotland, it pales in comparison to the more than £300 billion the UK government expects to issue in bonds this year.
The new borrowing powers are not a panacea for Scotland’s fiscal challenges. The next government faces a resource and capital spending gap forecast to reach £4.7 billion by the end of the decade. The bonds, as several analysts have pointed out, are not “new money”—they simply represent a different way of borrowing to fund necessary projects. Nevertheless, the ability to issue bonds is seen as an important tool for managing Scotland’s finances and boosting its international profile.
Political debate around the bond issuance has been lively, as one might expect. Swinney, for his part, has hailed the high credit ratings as a “proud day for Scotland.” He argued, “It makes Scotland a much more attractive destination for investment. Scotland’s economic strength is at the forefront of these credit assessments. We have achieved the best possible rating we could have achieved within the United Kingdom and have achieved a rating that is better than many other European countries.” Swinney also emphasized, “Scotland has a strong and diverse economy, that we’ve got good financial management and good strong institutions that are underpinning our financial operations as a country. That should give us enormous confidence about the economic foundations of Scotland.”
Not everyone is convinced that the bond program is an unalloyed good. Craig Hoy, finance spokesman for the Scottish Conservatives, was quick to point out that Scotland’s good rating is “a direct result of us being part of the UK, and the financial security that brings.” He added, “Despite the desperate attempts by the SNP to spin it otherwise, the ratings agencies highlight the economic stability we enjoy from being part of the Union. Both S&P and Moody’s say that the ratings would be downgraded if there were any moves towards breaking up the UK.”
Indeed, both Moody’s and S&P Global have cautioned that any serious moves toward Scottish independence could put downward pressure on the country’s credit rating. Moody’s stated, “Although not our baseline scenario, Scottish independence could exert downward pressure on the rating by introducing heightened uncertainty about the institutional framework and potentially raising financial stability risks.” S&P Global noted that while the likelihood of separation from the UK is “low,” “material steps toward independence could affect monetary and fiscal arrangements with the UK government.”
The independence debate remains a central theme in Scottish political life. The SNP, which has led the devolved government since 2007, argues that if it wins a fresh majority in the upcoming Holyrood elections, that would represent a mandate for another independence referendum. A recent Survation poll showed the SNP leading on 35%, with Labour trailing at 19%, suggesting that the question of Scotland’s future relationship with the UK is far from settled.
Scotland is not entirely new to the world of bonds. In 2016, Aberdeen City Council became the first local authority in Scotland to raise funds through the capital markets, issuing £370 million in bonds for a major investment program. Now, the national government is preparing to follow suit, with the advice of accountancy giant EY to help guide the process.
As Scotland prepares to enter the bond markets, the eyes of investors, politicians, and ordinary Scots alike will be watching closely. The upcoming Holyrood election and the evolving debate over independence will shape not only the future of Scottish finances, but also the wider question of what kind of country Scotland wants to be. For now, the stage is set for a historic financial experiment—one that could reshape the nation’s economic landscape for years to come.
